CHARTER COMMUNICATIONS, INC. /MO/ 10-Q

Item 1. Financial Statements. CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (dollars in millions, except share data) June 30, 2024 December 31, 2023 (unaudited) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 602 $ 709 Accounts receivable, less allowance for doubtful accounts of $ 188 and $ 268 , respectively 3,000 2,965 Prepaid expenses and other current assets 531 458 Total current assets 4,133 4,132 INVESTMENT IN CABLE PROPERTIES: Property, plant and equipment, net of accumulated depreciation of $ 38,362 and $ 37,751 , respectively 41,256 39,520 Customer relationships, net of accumulated amortization of $ 16,966 and $ 16,523 , respectively 1,319 1,745 Franchises 67,444 67,396 Goodwill 29,668 29,668 Total investment in cable properties, net 139,687 138,329 OTHER NONCURRENT ASSETS 4,791 4,732 Total assets $ 148,611 $ 147,193 LIABILITIES AND SHAREHOLDERS’ EQUITY CURRENT LIABILITIES: Accounts payable, accrued and other current liabilities $ 10,726 $ 11,214 Current portion of long-term debt — 2,000 Total current liabilities 10,726 13,214 LONG-TERM DEBT 96,692 95,777 EQUIPMENT INSTALLMENT PLAN FINANCING FACILITY 873 — DEFERRED INCOME TAXES 18,927 18,954 OTHER LONG-TERM LIABILITIES 4,679 4,530 SHAREHOLDERS’ EQUITY: Class A common stock; $ 0.001 par value; 900 million shares authorized; 145,630,393 and 145,225,458 shares issued, respectively — — Class B common stock; $ 0.001 par value; 1,000 shares authorized; 1 share issued and outstanding — — Preferred stock; $ 0.001 par value; 250 million shares authorized; no shares issued and outstanding — — Additional paid-in capital 23,681 23,346 Accumulated deficit ( 9,923 ) ( 12,260 ) Treasury stock at cost; 2,889,207 and no shares, respectively ( 879 ) — Total Charter shareholders’ equity 12,879 11,086 Noncontrolling interests 3,835 3,632 Total shareholders’ equity 16,714 14,718 Total liabilities and shareholders’ equity $ 148,611 $ 147,193 The accompanying notes are an integral part of these consolidated financial statements. 1 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (dollars in millions, except per share data) Unaudited Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 REVENUES $ 13,685 $ 13,659 $ 27,364 $ 27,312 COSTS AND EXPENSES: Operating costs and expenses (exclusive of items shown separately below) 8,173 8,305 16,569 16,816 Depreciation and amortization 2,170 2,172 4,360 4,378 Other operating (income) expenses, net 79 ( 58 ) 41 ( 48 ) 10,422 10,419 20,970 21,146 Income from operations 3,263 3,240 6,394 6,166 OTHER INCOME (EXPENSES): Interest expense, net ( 1,328 ) ( 1,298 ) ( 2,644 ) ( 2,563 ) Other expenses, net ( 85 ) ( 85 ) ( 174 ) ( 189 ) ( 1,413 ) ( 1,383 ) ( 2,818 ) ( 2,752 ) Income before income taxes 1,850 1,857 3,576 3,414 Income tax expense ( 427 ) ( 444 ) ( 873 ) ( 818 ) Consolidated net income 1,423 1,413 2,703 2,596 Less: Net income attributable to noncontrolling interests ( 192 ) ( 190 ) ( 366 ) ( 352 ) Net income attributable to Charter shareholders $ 1,231 $ 1,223 $ 2,337 $ 2,244 EARNINGS PER COMMON SHARE ATTRIBUTABLE TO CHARTER SHAREHOLDERS: Basic $ 8.58 $ 8.15 $ 16.24 $ 14.89 Diluted $ 8.49 $ 8.05 $ 16.03 $ 14.69 Weighted average common shares outstanding, basic 143,329,828 150,091,880 143,920,073 150,761,406 Weighted average common shares outstanding, diluted 144,914,860 151,975,698 145,742,397 152,727,540 The accompanying notes are an integral part of these consolidated financial statements. 2 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (dollars in millions) Unaudited Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Charter Shareholders’ Equity Non-controlling Interests Total Shareholders’ Equity BALANCE, December 31, 2023 $ — $ — $ 23,346 $ ( 12,260 ) $ — $ 11,086 $ 3,632 $ 14,718 Consolidated net income — — — 1,106 — 1,106 174 1,280 Stock compensation expense — — 214 — — 214 — 214 Exercise of stock options — — 2 — — 2 — 2 Purchases of treasury stock, including excise tax — — — — ( 516 ) ( 516 ) — ( 516 ) Purchase of noncontrolling interest, net of tax — — ( 28 ) — — ( 28 ) ( 58 ) ( 86 ) Change in noncontrolling interest ownership, net of tax — — 10 — — 10 ( 13 ) ( 3 ) Distributions to noncontrolling interest — — — — — — ( 3 ) ( 3 ) BALANCE, March 31, 2024 — — 23,544 ( 11,154 ) ( 516 ) 11,874 3,732 15,606 Consolidated net income — — — 1,231 — 1,231 192 1,423 Stock compensation expense — — 153 — — 153 — 153 Purchases of treasury stock, including excise tax — — — — ( 363 ) ( 363 ) — ( 363 ) Purchase of noncontrolling interest, net of tax — — ( 4 ) — — ( 4 ) ( 42 ) ( 46 ) Change in noncontrolling interest ownership, net of tax — — ( 12 ) — — ( 12 ) 14 2 Distributions to noncontrolling interest — — — — — — ( 61 ) ( 61 ) BALANCE, June 30, 2024 $ — $ — $ 23,681 $ ( 9,923 ) $ ( 879 ) $ 12,879 $ 3,835 $ 16,714 Class A Common Stock Class B Common Stock Additional Paid-in Capital Accumulated Deficit Treasury Stock Total Charter Shareholders’ Equity Non-controlling Interests Total Shareholders’ Equity BALANCE, December 31, 2022 $ — $ — $ 23,940 $ ( 14,821 ) $ — $ 9,119 $ 3,430 $ 12,549 Consolidated net income — — — 1,021 — 1,021 162 1,183 Stock compensation expense — — 208 — — 208 — 208 Exercise of stock options — — 2 — — 2 — 2 Purchases of treasury stock, including excise tax — — — — ( 920 ) ( 920 ) — ( 920 ) Purchase of noncontrolling interest, net of tax — — ( 40 ) — — ( 40 ) ( 68 ) ( 108 ) Change in noncontrolling interest ownership, net of tax — — 28 — — 28 ( 37 ) ( 9 ) Distributions to noncontrolling interest — — — — — — ( 3 ) ( 3 ) BALANCE, March 31, 2023 — — 24,138 ( 13,800 ) ( 920 ) 9,418 3,484 12,902 Consolidated net income — — — 1,223 — 1,223 190 1,413 Stock compensation expense — — 168 — — 168 — 168 Exercise of stock options — — 3 — — 3 — 3 Purchases of treasury stock — — — — ( 330 ) ( 330 ) — ( 330 ) Purchase of noncontrolling interest, net of tax — — ( 16 ) — — ( 16 ) ( 34 ) ( 50 ) Change in noncontrolling interest ownership, net of tax — — ( 6 ) — — ( 6 ) 7 1 Distributions to noncontrolling interest — — — — — — ( 80 ) ( 80 ) BALANCE, June 30, 2023 $ — $ — $ 24,287 $ ( 12,577 ) $ ( 1,250 ) $ 10,460 $ 3,567 $ 14,027 The accompanying notes are an integral part of these consolidated financial statements. 3 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (dollars in millions) Unaudited Six Months Ended June 30, 2024 2023 CASH FLOWS FROM OPERATING ACTIVITIES: Consolidated net income $ 2,703 $ 2,596 Adjustments to reconcile consolidated net income to net cash flows from operating activities: Depreciation and amortization 4,360 4,378 Stock compensation expense 367 376 Noncash interest, net 16 4 Deferred income taxes ( 13 ) ( 63 ) Other, net 105 187 Changes in operating assets and liabilities, net of effects from acquisitions and dispositions: Accounts receivable ( 33 ) 57 Prepaid expenses and other assets ( 265 ) ( 361 ) Accounts payable, accrued liabilities and other ( 175 ) ( 540 ) Net cash flows from operating activities 7,065 6,634 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property, plant and equipment ( 5,644 ) ( 5,298 ) Change in accrued expenses related to capital expenditures 233 ( 4 ) Other, net ( 225 ) ( 287 ) Net cash flows from investing activities ( 5,636 ) ( 5,589 ) CASH FLOWS FROM FINANCING ACTIVITIES: Borrowings of long-term debt 14,743 11,048 Borrowings of equipment installment plan financing facility 876 — Repayments of long-term debt ( 15,784 ) ( 10,735 ) Payments for debt issuance costs ( 27 ) ( 18 ) Purchase of treasury stock ( 877 ) ( 1,238 ) Proceeds from exercise of stock options 2 5 Purchase of noncontrolling interest ( 141 ) ( 176 ) Distributions to noncontrolling interest ( 64 ) ( 83 ) Other, net ( 224 ) ( 15 ) Net cash flows from financing activities ( 1,496 ) ( 1,212 ) NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 67 ) ( 167 ) CASH, CASH EQUIVALENTS AND RESTRICTED CASH, beginning of period 709 645 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, end of period $ 642 $ 478 CASH PAID FOR INTEREST $ 2,598 $ 2,432 CASH PAID FOR TAXES $ 647 $ 906 As of June 30, 2024, cash, cash equivalents and restricted cash includes $ 40 million of restricted cash included in prepaid expenses and other current assets in the consolidated balance sheets. The accompanying notes are an integral part of these consolidated financial statements. 4 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) 1. Organization and Basis of Presentation Organization Charter Communications, Inc. (together with its controlled subsidiaries, “Charter,” or the “Company”) is a leading broadband connectivity company and cable operator. Over an advanced communications network, the Company offers a full range of state-of-the-art residential and business services including Spectrum Internet ® , TV, Mobile and Voice. For small and medium-sized companies, Spectrum Business ® delivers the same suite of broadband products and services coupled with special features and applications to enhance productivity, while for larger businesses and government entities, Spectrum Enterprise ® provides highly customized, fiber-based solutions. Spectrum Reach ® delivers tailored advertising and production for the modern media landscape. The Company also distributes award-winning news coverage and sports programming to its customers through Spectrum Networks. Charter is a holding company whose principal asset is a controlling equity interest in Charter Communications Holdings, LLC (“Charter Holdings”), an indirect owner of Charter Communications Operating, LLC (“Charter Operating”) under which substantially all of the operations reside. All significant intercompany accounts and transactions among consolidated entities have been eliminated. The Company’s operations are managed and reported to its Chief Executive Officer (“CEO”), the Company’s chief operating decision maker, on a consolidated basis. The CEO assesses performance and allocates resources based on the consolidated results of operations. Under this organizational and reporting structure, the Company has one reportable segment. Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (the “SEC”). Accordingly, certain information and footnote disclosures typically included in the Company's Annual Report on Form 10-K have been condensed or omitted for this quarterly report. The accompanying consolidated financial statements are unaudited and are subject to review by regulatory authorities. However, in the opinion of management, such financial statements include all adjustments, which consist of only normal recurring adjustments, necessary for a fair presentation of the results for the periods presented. Interim results are not necessarily indicative of results for a full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Areas involving significant judgments and estimates include capitalization of labor and overhead costs, pension benefits and income taxes. Actual results could differ from those estimates. Comprehensive income equaled net income attributable to Charter shareholders for the three and six months ended June 30, 2024 and 2023. 5 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) 2. Accounts Payable, Accrued and Other Current Liabilities Accounts payable, accrued and other current liabilities consist of the following as of June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Accounts payable – trade $ 832 $ 931 Deferred revenue 480 509 Accrued and other current liabilities: Programming costs 1,668 1,736 Labor 1,192 1,283 Capital expenditures 2,071 1,944 Interest 1,370 1,328 Taxes and regulatory fees 896 681 Other 2,217 2,802 $ 10,726 $ 11,214 3. Total Debt A summary of our debt as of June 30, 2024 and December 31, 2023 is as follows: June 30, 2024 December 31, 2023 Principal Amount Carrying Value Fair Value Principal Amount Carrying Value Fair Value Senior unsecured notes $ 27,250 $ 27,174 $ 23,625 $ 27,250 $ 27,168 $ 24,750 Senior secured notes and debentures (a) 56,214 56,506 46,936 57,925 58,250 50,742 Credit facilities (b) 13,060 13,012 12,839 12,413 12,359 12,237 $ 96,524 $ 96,692 $ 83,400 $ 97,588 $ 97,777 $ 87,729 (a) Includes the Company's £ 625 million fixed-rate British pound sterling denominated notes (the “Sterling Notes”) (remeasured at $ 791 million and $ 797 million as of June 30, 2024 and December 31, 2023, respectively, using the exchange rate at the respective dates) and the Company's £ 650 million aggregate principal amount of Sterling Notes (remeasured at $ 823 million and $ 828 million as of June 30, 2024 and December 31, 2023, respectively, using the exchange rate at the respective dates). (b) The Company has availability under the Charter Operating credit facilities of approximately $ 4.1 billion as of June 30, 2024. The estimated fair value of the Company’s senior unsecured and secured notes and debentures as of June 30, 2024 and December 31, 2023 is based on quoted market prices in active markets and is classified within Level 1 of the valuation hierarchy, while the estimated fair value of the Company’s credit facilities is based on quoted market prices in inactive markets and is classified within Level 2. In May 2024, Charter Operating and Charter Communications Operating Capital Corp. jointly issued $ 1.5 billion of 6.100 % senior secured notes due June 2029 at a price of 99.944 % of the aggregate principal amount and $ 1.5 billion of 6.550 % senior secured notes due June 2034 at a price of 99.755 % of the aggregate principal amount. The net proceeds were used to fund a concurrent tender offer to repurchase $ 2.7 billion in aggregate principal amount of Charter Operating's 4.908 % senior secured notes due July 2025, to prepay Charter Operating's outstanding Term B-1 Loan and to pay related fees and expenses. The transactions resulted in a gain on extinguishment of debt of approximately $ 9 million for the three and six months ended June 30, 2024. 6 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) 4. Equipment Installment Plan Financing Facility In June 2024, a bankruptcy remote special purpose vehicle and consolidated subsidiary of the Company, CCO EIP Financing, LLC, (the “SPV Borrower”) entered into a senior secured revolving credit facility to finance the purchase of equipment installment plan receivables (“EIP Receivables”) with a number of financial institutions (the “EIP Financing Facility”). The revolving credit facility under the EIP Financing Facility bears interest on the outstanding borrowings based on lenders’ cost of funds plus an applicable margin and was 6.46 % as of June 30, 2024. The EIP Financing Facility has a final maturity date of June 20, 2028, comprised of a one-year revolving loan period, subject to annual renewal, and if not renewed, cash flows on EIP Receivables are applied to amortize the loan which may occur over a period of up to three years. SPV Borrower may borrow up to $ 1.25 billion under the EIP Financing Facility. As of June 30, 2024, the carrying value of the EIP Financing Facility was $ 873 million and is included in the Company’s consolidated balance sheets. The SPV Borrower’s sole business consists of the purchase or acceptance through capital contributions of the EIP Receivables from Spectrum Mobile Equipment, LLC, (the sole direct parent entity of SPV Borrower that originates the EIP Receivables) and the subsequent retransfer of or granting of a security interest in such EIP Receivables to the administrative agent under the EIP Financing Facility. The SPV Borrower is a separate legal entity with its own separate creditors who will be entitled, upon its liquidation, to be satisfied out of the SPV Borrower’s assets prior to any assets or value in the SPV Borrower becoming available to the SPV Borrower’s equity holders, and the assets of the SPV Borrower are not available to pay creditors of any other affiliate of the Company. The EIP Financing Facility is accounted for on a consolidated basis as a secured borrowing. As of June 30, 2024, pledged EIP Receivables with an unpaid principal balance of $ 1.3 billion, included in accounts receivable, net and other noncurrent assets, and restricted cash of $ 40 million, included in prepaid expenses and other current assets, are held by the SPV Borrower and reflected in the Company’s consolidated balance sheets. Receipts from mobile customers related to the underlying EIP Receivables are reflected as cash flows from operating activities and borrowings and repayments under the EIP Financing Facility are reflected as cash flows from financing activities in the Company’s consolidated statements of cash flows. 5. Common Stock The following represents the Company's purchase of Charter Class A common stock and the effect on the consolidated statements of cash flows during the three and six months ended June 30, 2024 and 2023. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Shares $ Shares $ Shares $ Shares $ Share buybacks 1,321,827 $ 358 954,330 $ 324 2,731,424 $ 830 3,258,749 $ 1,187 Income tax withholding 9,652 3 4,999 2 131,559 47 132,814 51 Exercise cost 174 — 13,111 — 26,224 — 53,792 — 1,331,653 $ 361 972,440 $ 326 2,889,207 $ 877 3,445,355 $ 1,238 Share buybacks above include shares of Charter Class A common stock purchased from Liberty Broadband Corporation (“Liberty Broadband”) as follows. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Number of shares purchased 130,687 — 343,903 120,149 Amount of shares purchased $ 35 $ — $ 116 $ 42 As of June 30, 2024, Charter had remaining board authority to purchase an additional $ 406 million of Charter’s Class A common stock and/or Charter Holdings common units, excluding purchases from Liberty Broadband. The Company also 7 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) withholds shares of its Class A common stock in payment of income tax withholding owed by employees upon vesting of equity awards as well as exercise costs owed by employees upon exercise of stock options. In 2023, Charter’s board of directors approved the retirement of the then currently held treasury stock and those shares were retired as of December 31, 2023. The Company accounts for treasury stock using the cost method and includes treasury stock as a component of total shareholders’ equity. 6. Noncontrolling Interests Noncontrolling interests represents consolidated subsidiaries of which the Company owns less than 100 %. The Company is a holding company whose principal asset is a controlling equity interest in Charter Holdings, the indirect owner of the Company’s cable systems. Noncontrolling interests on the Company’s balance sheet consist primarily of Advance/Newhouse Partnership's (“A/N”) equity interests in Charter Holdings, which is comprised of a common ownership interest. Net income of Charter Holdings attributable to A/N’s common noncontrolling interest for financial reporting purposes is based on the weighted average effective common ownership interest of approximately 11 %, and was $ 192 million and $ 365 million for the three and six months ended June 30, 2024, respectively, and $ 189 million and $ 351 million for the three and six months ended June 30, 2023, respectively. The following table represents Charter Holdings' purchase of Charter Holdings common units from A/N and the effect on total shareholders' equity during the three and six months ended June 30, 2024 and 2023. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Number of units purchased 169,428 157,075 431,767 481,175 Amount of units purchased $ 46 $ 54 $ 141 $ 176 Change in noncontrolling interest based on carrying value $ ( 42 ) $ ( 34 ) $ ( 100 ) $ ( 102 ) Change in additional paid-in-capital, net of tax $ ( 4 ) $ ( 16 ) $ ( 32 ) $ ( 56 ) Total shareholders' equity was also adjusted during the three and six months ended June 30, 2024 and 2023 due to the changes in Charter Holdings' ownership as follows. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Change in noncontrolling interest $ 14 $ 7 $ 1 $ ( 30 ) Change in additional paid-in-capital, net of tax $ ( 12 ) $ ( 6 ) $ ( 2 ) $ 22 7. Accounting for Derivative Instruments and Hedging Activities Cross-currency derivative instruments are used to manage foreign exchange risk on the Sterling Notes by effectively converting £ 1.275 billion aggregate principal amount of fixed-rate British pound sterling denominated debt, including annual interest payments and the payment of principal at maturity, to fixed-rate U.S. dollar denominated debt. The fair value of the Company's cross-currency derivatives, which are classified within Level 2 of the valuation hierarchy, was $ 469 million and $ 440 million and is included in other long-term liabilities on its consolidated balance sheets as of June 30, 2024 and December 31, 2023, respectively. 8 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) The effect of financial instruments are recorded in other expenses, net in the consolidated statements of operations and consisted of the following. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Change in fair value of cross-currency derivative instruments $ ( 9 ) $ 43 $ ( 29 ) $ 48 Foreign currency remeasurement of Sterling Notes to U.S. dollars ( 5 ) ( 46 ) 11 ( 78 ) Loss on financial instruments, net $ ( 14 ) $ ( 3 ) $ ( 18 ) $ ( 30 ) 8. Revenues The Company’s revenues by product line are as follows: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Internet $ 5,806 $ 5,733 $ 11,632 $ 11,451 Video 3,867 4,188 7,775 8,442 Voice 350 365 724 738 Mobile service 737 539 1,422 1,036 Residential revenue 10,760 10,825 21,553 21,667 Small and medium business 1,101 1,094 2,189 2,185 Enterprise 721 690 1,429 1,372 Commercial revenue 1,822 1,784 3,618 3,557 Advertising sales 397 384 788 739 Other 706 666 1,405 1,349 $ 13,685 $ 13,659 $ 27,364 $ 27,312 As of June 30, 2024 and December 31, 2023, accounts receivable, net on the consolidated balance sheets includes approximately $ 803 million and $ 673 million of current equipment installment plan receivables, respectively, and other noncurrent assets includes approximately $ 854 million and $ 687 million of noncurrent equipment installment plan receivables, respectively. 9 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) 9. Operating Costs and Expenses Operating costs and expenses, exclusive of items shown separately in the consolidated statements of operations, consist of the following for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Programming $ 2,472 $ 2,740 $ 5,042 $ 5,539 Other costs of revenue 1,538 1,367 2,996 2,695 Costs to service customers 1,981 2,069 4,075 4,164 Sales and marketing 912 895 1,832 1,841 Other expense 1,270 1,234 2,624 2,577 $ 8,173 $ 8,305 $ 16,569 $ 16,816 Programming costs consist primarily of costs paid to programmers for basic, premium, video on demand and pay-per-view programming. Other costs of revenue include costs directly related to providing Internet, video, voice and mobile services including mobile device costs, payments to franchise and regulatory authorities, payments for sports, local and news content produced by the Company and direct costs associated with selling advertising. Also included in other costs of revenue are content acquisition costs for the Los Angeles Lakers’ basketball games and Los Angeles Dodgers’ baseball games, which are recorded as games are exhibited over the contract period. Costs to service customers include costs related to field operations, network operations and customer operations for the Company’s products, including mobile, sold to non-bulk residential and small and medium business ("SMB") customers including internal and third-party labor for the non-capitalizable portion of installations, service and repairs, maintenance, bad debt expense, billing and collection, occupancy and vehicle costs. Sales and marketing costs represent the costs of selling and marketing our Internet, video, voice and mobile services to current and potential non-bulk residential and SMB customers, including labor cost. Other expense includes indirect costs associated with the Company’s Spectrum Enterprise, Spectrum Reach, Spectrum Networks and Spectrum Community Solutions businesses, including sales and marketing and bad debt expenses as well as corporate overhead and stock compensation expense, among others. 10. Other Operating (Income) Expenses, Net Other operating (income) expenses, net consist of the following for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Special charges, net $ 76 $ ( 52 ) $ 89 $ ( 42 ) (Gain) loss on disposal of assets, net 3 ( 6 ) ( 48 ) ( 6 ) $ 79 $ ( 58 ) $ 41 $ ( 48 ) Special charges, net primarily includes severance costs and net amounts of litigation settlements. (Gain) loss on disposal of assets, net includes a $ 67 million gain on sale of towers during the six months ended June 30, 2024. 10 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) 11. Other Expenses, Net Other expenses, net consist of the following for the periods presented: Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Gain on extinguishment of debt (see Note 3) $ 9 $ — $ 9 $ — Loss on financial instruments, net (see Note 7) ( 14 ) ( 3 ) $ ( 18 ) $ ( 30 ) Net periodic pension benefits 1 1 2 3 Loss on equity investments, net ( 81 ) ( 83 ) ( 167 ) ( 162 ) $ ( 85 ) $ ( 85 ) $ ( 174 ) $ ( 189 ) 12. Stock Compensation Plans Charter’s stock incentive plans provide for grants of nonqualified stock options, incentive stock options, stock appreciation rights, dividend equivalent rights, performance units and performance shares, share awards, phantom stock, restricted stock units and restricted stock. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting services for the Company, are eligible for grants under the stock incentive plans. Charter granted the following equity awards for the periods presented. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Stock options 13,800 21,500 1,358,400 4,257,200 Restricted stock 13,400 10,300 13,400 10,300 Restricted stock units 16,700 21,500 1,099,800 1,535,900 Stock options and restricted stock units generally cliff vest three years from the date of grant. Certain stock options and restricted stock units vest based on achievement of stock price hurdles. Stock options generally expire ten years from the grant date and restricted stock units have no voting rights. Restricted stock generally vests one year from the date of grant. As of June 30, 2024, total unrecognized compensation remaining to be recognized in future periods totaled $ 399 million for stock options, $ 3 million for restricted stock and $ 580 million for restricted stock units and the weighted average period over which they are expected to be recognized is two years for stock options, ten months for restricted stock and two years for restricted stock units. The Company recorded stock compensation expense of $ 153 million and $ 367 million for the three and six months ended June 30, 2024, respectively, and $ 168 million and $ 376 million for the three and six months ended June 30, 2023, respectively, which is included in operating costs and expenses. 13. Earnings Per Share Basic earnings per common share is computed by dividing net income attributable to Charter shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per common share considers the impact of potentially dilutive securities using the treasury stock and if-converted methods and is based on the weighted average number of shares used for the basic earnings per share calculation, adjusted for the dilutive effect of stock options, restricted stock, restricted stock units, equity awards with market conditions and Charter Holdings common units. Charter Holdings common units of 17 million for the three and six months ended June 30, 2024 and 18 million for the three and six months ended June 30, 2023 were not included in the computation of diluted earnings per share as their effect would have been antidilutive. 11 CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (dollars in millions, except per share amounts and where indicated) The following is the computation of diluted earnings per common share for the three and six months ended June 30, 2024 and 2023. Three Months Ended June 30, Six Months Ended June 30, 2024 2023 2024 2023 Numerator: Net income attributable to Charter shareholders $ 1,231 $ 1,223 $ 2,337 $ 2,244 Denominator: Weighted average common shares outstanding, basic 143,329,828 150,091,880 143,920,073 150,761,406 Effect of dilutive securities: Assumed exercise or issuance of shares relating to stock plans 1,585,032 1,883,818 1,822,324 1,966,134 Weighted average common shares outstanding, diluted 144,914,860 151,975,698 145,742,397 152,727,540 Basic earnings per common share attributable to Charter shareholders $ 8.58 $ 8.15 $ 16.24 $ 14.89 Diluted earnings per common share attributable to Charter shareholders $ 8.49 $ 8.05 $ 16.03 $ 14.69 14. Contingencies The Company is a defendant or co-defendant in several lawsuits involving alleged infringement of various intellectual property relating to various aspects of its businesses. Other industry participants are also defendants in certain of these cases or related cases. In the event that a court ultimately determines that the Company infringes on any intellectual property, the Company may be subject to substantial damages and/or an injunction that could require the Company or its vendors to modify certain products and services the Company offers to its subscribers, as well as negotiate royalty or license agreements with respect to the intellectual property at issue. While the Company believes the lawsuits are without merit and intends to defend the actions vigorously, no assurance can be given that any adverse outcome would not be material to the Company’s operations, consolidated financial condition, results of operations, or liquidity. The Company cannot predict the outcome of any such claims nor can it reasonably estimate a range of possible loss. The Company is party to other lawsuits, claims and regulatory inquiries or investigations that arise in the ordinary course of conducting its business or in connection with the Company’s participation in government funding programs. The ultimate outcome of these other legal matters pending against the Company cannot be predicted, and although such lawsuits and claims are not expected individually to have a material adverse effect on the Company’s operations, consolidated financial condition, results of operations or liquidity, such lawsuits could have, in the aggregate, a material adverse effect on the Company’s operations, consolidated financial condition, results of operations or liquidity. Whether or not the Company ultimately prevails in any particular lawsuit or claim, litigation can be time consuming and costly and injure the Company’s reputation. 12